WH Group

Shuanghui Group
双汇集团
Private with public subsidiary
Industry Food
Founded 1958
Headquarters Luohe, Henan, People's Republic of China
Area served
 People's Republic of China
Key people
 Wan Long (Chairman)[1]
Products Meat
Revenue $21.21 billion [2][3]
Owner CDH Investments (33.7%)
Goldman Sachs (5.2%)
New Horizon Capital (4.2%), Temasek Holdings (2.8%).[4]
Number of employees
 62,000 - 63,000
Subsidiaries Henan Shuanghui Investment & Development (Shuanghui Development)
Smithfield Foods
Website WH Group
Shuanghui Development

WH Group (Chinese: 万洲国际; pinyin: Wànzhōu guójì), formerly known as Shuanghui Group (Chinese: 双汇集团; pinyin: Shuānghuì jítuán),[5] is a privately owned Chinese meat and food processing company headquartered in Luohe, Henan, China.[6][7] Sometimes also known as Shineway Group in English-speaking countries, the company's businesses include hog raising, consumer meat products, flavoring products, and logistics.[8] It is the largest pork producer in the world,[7] and the largest meat producer in China.[9]

Shuanghui has 13 facilities that produce more than 2.7 million tons of meat per year.[5] It slaughters more than 15 million pigs a year, but only raises about 400,000; the rest are purchased from suppliers.[1] The company holds more than 500 patents and produces 1,000 different products.[7]

Wan Long (Chinese: 万隆), nicknamed China's "number one butcher" because of the large number of pigs the company slaughters, is the chairman of Shuanghui.[1] As of May 2013, Zhijun Yang is the managing director.[5] The company employs over 60,000 people and is 30% employee owned.[7]

Name

In January 2014, Shanghui International changed its name to WH Group, though one of its subsidiaries, Henan Shuanghui Investment & Development Co., Ltd., retained the Shanghui name.[10] The new name is derived from the initials of "Wanzhou Holdings," where the Chinese characters "wan" and "zhou" connote eternity and continents, respectively.[11] When it acquired Smithfield Foods in 2013, it was still known as Shanghui.

History

Shuanghui was set up by the local Luohe city government in 1958 as a single processing plant. Wan Long was appointed chairman in 1984. Under Wan, the company has expanded aggressively. In his first year, he turned around a struggling company, bringing it from a net loss to a net profit of 5 million yuan ($1.7 million).[9] The company introduced its first branded meat product to the market in February 1992. Later that year, Shuanghui formed a joint venture with 16 institutional investors across six countries.[7] In 1994, the venture was incorporated as Shuanghui Group.[12] Shuanghui subsidiary Henan Shuanghui Investment & Development Company Limited (SZSE: 000895) was established and listed on the Shenzhen Stock Exchange in 1998.[13] In 2000, Shuanghui started a post-secondary educational-work research division.[7]

By 2006, Shuanghui was the largest food processor in China by company value, and 131st largest company overall. The company was valued at $1.3 billion, and controlled more than 50% of China's high-temperature processed meat market at that time.[12] That year, Luohe government sold its share of Shuanghui to a joint venture of Goldman Sachs and private equity firm CDH Investments.[14] Goldman Sachs later sold most of its share, reportedly for a large profit,[1] but owned 5.2% of the company as of May 2013.[4]

In 2011, state-owned CCTV revealed that Shuanghui pork contained clenbuterol, a banned chemical that can be harmful to humans.[5]

Acquisition of Smithfield Foods

On 29 May 2013, Shuanghui announced its intention to purchase American pork producer Smithfield Foods, Inc., for $34 per share, or approximately US$4.72 billion total. Including assumed debt, the total value of the deal was about $7.1 billion. The agreed purchase price represented a 31% premium over Smithfield's market price at the time when the deal was announced.[5] The businesses had been in discussion for four years before they were able to come to terms.[1]

Before it was finalized, the deal had to be approved by Smithfield shareholders and the U.S. Committee on Foreign Investment in the United States.[5] However, The Wall Street Journal predicted the deal was "unlikely to face serious opposition" from regulators.[6] "The administration clearly has a public policy of open arms – it's hard for me to believe that there are going to be many speed bumps in this transaction," said U.S. China Economic and Security Review Committee member Michael Wessel.[6] Several Congressmen expressed concerns over the purchase but stopped short of saying they would oppose it.[6] It was ultimately approved by Smithfield shareholders on September 24, 2013, and the merger was to be completed two days later.[15]

To allay potential concerns about food safety, Smithfield CEO Larry Pope stated the deal would "[preserve] the same old Smithfield, only with more opportunities and new markets and new frontiers."[5] No Chinese pork would be imported to the United States, he stated, but rather Shuanghui desired to export American pork. There is a growing demand for foreign food products in China due to recent food scandals.[5] Smithfield's existing management team would remain intact and no major changes to its workforce would occur.[5] Analyst Derek Scissors said companies such as Shuanghui are "not looking to cause any trouble in the American market ...They want to gain from what the U.S. is able to do."[5] China has been a net importer of pork since 2008.[1]

The deal was the largest ever takeover of a U.S. company by a Chinese company,[5] roughly doubling the number of US jobs tied to direct investment by China. The previous largest takeover was Dalian Wanda Group's acquisition of AMC Theatres for $2.6 billion.[9] Smithfield ceased to be publicly traded at the deal's completion.[5]

In July 2013, Shuanghui announced its plan to list Smithfield on the Hong Kong Stock Exchange after completing the takeover. The IPO was expected to see the firm valued at around $4 billion.[16] However, the IPO plan was ultimately scrapped in 2014.[17]

References

  1. 1 2 3 4 5 6 "Pigs will fly". The Economist. 1 June 2013.
  2. ↑ WH Group 2015 Annual Report
  3. ↑ The World's Most Innovative Companies: #24 Henan Shuanghui Investment
  4. 1 2 Aldred, Stephen; Wu, Kane (May 31, 2013). "Banks said to lend China's Shuanghui $7 billion for Smithfield deal". Reuters.
  5. 1 2 3 4 5 6 7 8 9 10 11 12 Chapman, Michelle (29 May 2013). "China's Shuanghui buying Smithfield Foods for about $4.72 billion, taking company private". Associated Press. Retrieved 2013-05-29.
  6. 1 2 3 4 "Opposition to China-Smithfield Deal Seen as Muted". Wall Street Journal. 29 May 2013. (subscription required)
  7. 1 2 3 4 5 6 "WH Group: Corporate Profile". WH Group.
  8. ↑ Paul Davidson; Elizabeth Weise (29 May 2013). "China's Shuanghui in $4.7B deal for Smithfield". USA Today.
  9. 1 2 3 McDonald, Joe (31 May 2013). "China's entrepreneurs expand global presence". Associated Press.
  10. ↑ "Corporate Profile". WH Group. Retrieved April 12, 2017.
  11. ↑ "Shuanghui International Changes Name to WH Group" (Press release). Business Wire. January 21, 2014.
  12. 1 2 Zhang Lu (4 March 2006). "Henan meat processor Shuanghui up for sale". China Daily. Retrieved 31 May 2013.
  13. ↑ Henan Shuanghui Investment & Development
  14. ↑ Shen Hu; Li Qing. "Off the Chopping Block, Onward for Shuanghui". Caixin Online. Retrieved 17 May 2013.
  15. ↑ Gayathri, Amrutha (September 24, 2013). "Smithfield Foods Shareholders Approve $4.7 Billion Acquisition By China's Shuanghui". International Business Times.
  16. ↑ Saeed Azhar and Stephen Aldred (16 July 2013). "Exclusive: Smithfield's China bidders plan Hong Kong IPO after deal - sources". Reuters.
  17. ↑ Prudence Ho (April 29, 2014). "WH Group Failed to Heed Signals Before Scrapping IPO". Wall Street Journal. (subscription required)
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